Reality of Nicotine Reform Provides Long-Lasting Tailwinds for 22nd Century Group

(FinancialPress)—In 1996, the U.S. Food and Drug Administration said nicotine was a drug and it had the authority to regulate its use in cigarettes and other tobacco products. The U.S. Court of Appeals didn’t agree, ruling that the agency needed the green light from Congress to do so. In 2009, Congress gave the FDA that power under the Tobacco Control Act. This past July, the FDA, under the guidance of newly-appointed Commissioner Scott Gottlieb, took its biggest step ever to throttle nicotine addiction and lower the burden of tobacco-related death and disease, declaring it wants to slash the legal amount of nicotine in cigarettes to non-addictive levels.

The initiative was cheered by anti-smoking groups and policymakers seeking to reform the cigarette industry, but viewed as adversarial by the $160 billion tobacco industry.

To 22nd Century Group (XXII), the FDA’s plans provided the latest tailwind to an uptrending company, one that has proven to be durable in the interim and likely for the foreseeable future. The company, headquartered in a suburb of Buffalo, New York, has the world’s biggest patent estate on genetically modifying nicotine levels in tobacco. It also has clinical evidence that its very-low nicotine (VLN) cigarettes, dubbed “Spectrum” for investigational use, are beneficial for smokers trying to kick the habit.

The U.S. government is well aware of Spectrum VLN smokes, which have 95% less nicotine in them that a top-selling traditional cigarette like a Marlboro Silver. Federal agencies have invested more than $100 million in independent clinical research with Spectrum cigarettes, collecting data that suggests lower nicotine levels in combustible cigarettes would improve public health.

Less than two months ago, XXII shipped the National Institute on Drug Abuse another 2.4 million Spectrum cigarettes for research.

Surely, Washington is being overrun by lobbyists fighting against cigarette reform, but the FDA doesn’t seem to be backing down. In November, top FDA officials reiterated in a blog post the goal for progressing with a comprehensive approach to nicotine and tobacco regulation by ensuring users have safe and effective options to quit conventional combustible cigarettes.

The FDA isn’t alone in its stance on the need to reduce nicotine dependence. The World Health Organization (WHO) sees nicotine as a public menace as well, in 2015 publishing its recommendations on policy to limit nicotine content to non-addictive levels. Officials in Canada, New Zealand and the United Kingdom are following the U.S.’s lead in pursuing policy to put the brakes on nicotine addiction.

As the only company in the world with the technology to grow tobacco at varying nicotine levels, there isn’t another public entity better aligned to benefit from the FDA’s and WHO’s positions on nicotine than 22nd Century. Grounded in tobacco research, the technology has in recent years been expanded to control key constituents in cannabis, giving investors exposure to other burgeoning industries too, including zero-THC industrial hemp, an industry first.

“We’re pretty much the only company like that they can grow a plant right out of the ground for use in cigarettes,” Jim Vail, Communications Director at 22nd Century, told WIVB Channel 4 in September.

In its support of the low-nicotine movement and to send a consistent message that the company is cooperating fully with FDA plans, 22nd Century said it is discontinuing U.S. sales of its Red Sun brand, a line of cigarettes with extra-high nicotine levels. As explained by Dr. James Swauger, Senior VP of Science and Regulatory Affairs for 22nd Century Group, “22nd Century stands ready to partner with the FDA and with any company that is committed to improving the health of American smokers.”

That statement of openness to partner, is most certainly directed at big tobacco as an invite to stop fighting against regulators and take a closer look nicotine-altering technology that falls within the FDA’s goals. Dr. Swauger certainly knows his way around big tobacco, spending 23 years at cigarette giant Reynolds American, including serving as Vice President of Regulatory Oversight from 2008 through 2016. In January 2017, British American Tobacco agreed to buy the remaining 57.8 percent of Reynolds it didn’t already own for $49.4 billion.

Dr. Juan Sanchez Tamburrino, who was appointed XXII’s VP of R&D last month, is no stranger to big tobacco either, previously serving as the head of the Plant Biotechnology Division of British American Tobacco where he was responsible for biotechnology strategy related to tobacco leaf.

Fact is that nicotine reform could be a bit of a lengthy process as international industry juggernauts fight to preserve the very essence of their businesses. However, the fact also remains that if it does come to fruition there is no company better positioned to be in high demand than XXII.

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